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Saturday, November 12, 2011

Celsion Q3 Conference Call Write-Up

"I want to open the call with a comment that I have made to a number of stakeholders over the last months, and that's this: I believe we're really on to something. We stand at the precipice of data from arguably one of the most important trials, if not in oncology, then certainly in liver cancer."

"The interim analysis, such as this one, is not uncommon in large, registrational trials in oncology. A halt for efficacy is, however, uncommon...That said, this is the first assessment of efficacy undertaken in a randomized population for a large study using Thermodox. So, the outcome [of the interim analysis] is certainly difficult for us to predict."

Given investor anticipation for the HEAT study interim analysis, I knew going into this call it would be one of the more memorable conference calls conducted by Celsion. To those of you who heard the call live, I think you would agree that indeed, it did turn out that way, particularly due to the lively Q&A session. Before the call, I emailed management many questions surrounding the interim analysis among other things, and I urged them to proactively address the interim analysis process and where they stand in the totality of the process. I'm glad that this issue was addressed in the CEO's prepared remarks. In what was a very informative, yet explosive, call at times, here is my summary of themes from the call, with quotes peppered in throughout:

A minimum of 190 PFS has been confirmed in Q3 per the SEC filing, and the interim analysis is still scheduled for Q4. In fact, management mentioned on the call that the DMC meeting date has been scheduled, and upon questioning from Nathaniel August during the Q&A, was understandably reluctant to disclose the exact date. My suspicion is the date of the DMC meeting is scheduled for sometime before the end of this month.

In the Q&A, the company mentioned that at the time of the announcement of complete enrollment of 600 patients in early August, the company was at or near 190 events based on their own internal tracking, not an official count of confirmed cases. The company eventually requested their independent CRO for an official count, with a "cushion." While the exact number was not revealed, I suspect it will be just under 200.

Stopping rules for interim: The company was unable to provide the P value required for a halt, in response to a question from Nathaniel August during the Q&A. The CEO said that for a decision to be made to halt the study, there "must be a strong rationale for doing so. The PFS bar has been set high intentionally to conserve alpha...an overall survival bar has not been set, but will have to be trending in the right direction. Thermodox toxicity profile again will be evaluated in parallel on a risk-benefit basis, as it has been in previous DMC reviews."

The fact that management highlighted there is no specific OS bar set for the interim bodes well for the potential chances of an efficacy halt.

Also, given the previous unanimous DMC recommendations conducted to date, I would think the safety portion of the risk-benefit profile will be heavily in Thermodox' favor. So, clearly, it is all going to come down to efficacy.

Top-line data from 380 events is due "as early as 1 year from now", and this will be accelerated by extending HEAT enrollment to 700 patients, approximately 50 more than the ~650 anticipated from the incremental amount from the extended enrollment ongoing in China.

During the exchange with Nathaniel August regarding who would be held responsible if final data is not out by the end of 2012, the CEO clearly stated that their decision to continue enrollment beyond 600, assuming enrollment goes as planned, should provide a benefit in terms of time to final data of 4-6 months based on their internal modeling.

So, I think it is fair to say that if the company did not plan to enroll any more patients beyond the 600, final data would unquestionably bleed into 2013, perhaps as late as middle of 2013. The additional 100 patients should hopefully get us final data 1 year from now.

There are 3 members in the DMC, as revealed by the CEO during the Q&A session. The DMC is supported by a members of their CRO and data management team. "We are fortunate to count among our IDMC members, some of the most respected statisticians and oncologists in the world, faith in their decision is absolute."

"Safety, PFS and survival", in other words, the "totality" of the data will be used to make decision by DMC, once again stressed by Dr. Borys, as he has done on previous calls.

Dr. Borys also reinforced the strong regulatory agency support the company has with respect to the HEAT trial, echoing Mr. Tardugno's prepared remarks. Implicit in such comments, both by the CEO and by the CMO, is that the company does not want to do anything to risk losing that support, such as unblinding the trial by releasing data without the full blessing of global regulatory agencies.

In response to my question about whether or not the DMC would have to consult with the FDA before an announcement is made in a potential unblinding scenario at the interim, the CEO mentioned that indeed the FDA would have to give their blessing.

It does not sound like there would be too much, if any, back and forth between the DMC and the FDA to make an interim decision. If the DMC recommends to unblind, the company will then consult with the FDA, and immediately issue a PR for that. So, even if the DMC recommends a halt due to overwhelming efficacy, we will not see any data immediately, just a PR saying that the company will consult with the FDA for their final blessing. Regardless, at that point it, would be a formality in my opinion.

If a recommendation to continue is made, the company mentioned that they are maintaining their previous guidance that no additional data would be released. However, the CEO mentioned that they would "consult with the DMC in detail" regarding this topic. So, there is still the possibility that we do get some data if a recommendation is made to continue the trial.

A follow-up question during the Q&A, however, muddies the waters a bit. After some back and forth, the company made it seem that they would only receive pooled data (a "4 inch" stack of papers) from the interim analysis, as they have been getting from all the previous DMC meetings done to date looking at safety.

On the topic of a continuation decision, the company reinforced during the Q&A that this would be a meaningful step forward for negotiations with potential licensing partners. In fact, the CEO mentioned that companies might "lose the opportunity" for a potential deal if they are only willing to wait for final data.

In what almost seemed like a Freudian slip, shrewd listeners may have caught something interesting during the call. During the Q&A, a caller asked in many ways what data the company would receive from the DMC's decision, regardless of whether the decision is a halt or not. After going back and forth many times with this caller, here is verbatim what Mr. Tardugno said: "I think we tried to answer how ticklish this is, we are threading a needle here. We want to make sure our commitment to the FDA is maintained, and that's before we unblind the trial that we involve the agency. As we said earlier, that is going to be a matter of discussion with the DMC when we meet them in the near-term." Depending on how you want to look at this, it almost seems implicit that unblinding the trial is squarely on the company's mind (Not to mention, after my own question about FDA involvement in a potential halt scenario, Mr. Tardugno said he and Dr. Borys were just talking about that earlier in the morning).

CEO mentioned that the ABLATE trial is underway at Albert Einstein Medical Center, and a second trial site is nearly complete. The company also mentioned that they intend to establish other trial sites for the ABLATE study, however, how many and in what geographies, was not mentioned.

The company provided no real meaningful update on the Philips MRI-HIFU IND for bone mets, just a simple rehash of previous information. However, the company did say that the FDA is still awaiting responses from their partner, Philips, regarding their HIFU system, Sonalleve.

Unfortunately, there was no meaningful update on next steps for the Phase 2 DIGNITY study.

Jeff Church mentioned an interesting point that has gone largely unnoticed by many. He specifically mentioned that the company would seek "geographic and indication-specific partnerships", which is certainly news to me. Up until now, it was my assumption that outlicensing terms would largely include every potential Thermodox indication, but it is good to see that they are considering breaking out deals by indication.

During Q3, the company met with the EMA pre-advice committee. The company is revising and submitting their briefing book submission, due by the end of this month. A response should be given by year end, the company will PR this event, and their approach forward in Europe.

From a CMC perspective, the first of three registrational batches is being completed in the next two weeks, while the remaining two batches will be done this year. Completion of these batches is critical for regulatory submission, and their scalable manufacturing approach will support 90% + margins at launch, per management.

Celsion intends to expand the number of contract manufacturing organizations to reduce chances of a potential delay in registration, and to give supply chain reassurance to potential partners.

In the Q&A, the company reinforced that they don't see any direct competitive threats in the horizon. Here is one area where I wish the caller would have countered by asking about the potential threat of Nexavar as being studied in the Phase III STORM trial. Aside from TACE + RFA, which by itself is a competitive threat, I would have liked the company to have mentioned that they are keeping adjuvant use of Nexavar in the back of their minds. But, for the most part, competition is very slim in the liver cancer space, particularly in China, where Nexavar is rarely used because of its high price.

Q3 ended with 21.4M in cash. At this point, using 1.7M burn rate / month, the company probably has ~$18M or so in cash.

I have said that I was expecting interim results by the end of October, early November, and I was clearly wrong. I will stick my neck out on a limb once again and say that we should have a DMC decision by the end of November, at the very latest, within the first few days of December. As I have said before , I remain highly enthusiastic regarding the outcome of the HEAT study, whether it happens at the interim or at final data next year.

Lastly, I want to thank management once again for taking my questions during the Q3 call, and for always being highly accessible to shareholders in general. I am certainly intrigued by Thermodox as an asset, but I am even more confident in management's ability to execute and successfully commercialize on its promise.